Posted on: 09-02-09 15:35:51
I dont know much about RESP I took the plan from (cefi) and contributing 100$ /month. Does anyone with cefi. They said after 17 year he ll get around $66K. If child doent go for higer edcution your ll be transfer to RRSP.
Anyobdy with cefi eudction program. How is their reputation. Is it a good plan or should I change it.
Quote:
Originally posted by adnancanada
I dont know much about RESP I took the plan from (cefi) and contributing 100$ /month. Does anyone with cefi. They said after 17 year he ll get around $66K. If child doent go for higer edcution your ll be transfer to RRSP.
Anyobdy with cefi eudction program. How is their reputation. Is it a good plan or should I change it.
Please go through following link
http://www.canadiandesi.ca/read.php?TID=22730
Personally, I not a fan of group plans offered by companies like Heritage, CEFI, Global etc. simply for following reasons
1) Very high enrolment fees. I think for CEFI it is about $ 200/unit (for group plan and self initiated plan). Chances are you have a group plan. Confirm this.
How does that effect you? Let me give you an example. Suppose you bought 10 units (confirm what you bought from your contract) at the price of $ 100/month. Now the enrollment fee would be $ 2000 ($ 200/unit*10 units).
First 10 monthly payments will go strictly towards enrolment fee (50 % of total enrolment fee of $ 2000). No investment for this period.
From 11 th month $ 50 will go towards enrolment fee and remaining $ 50 will go towards investment. Therefore it will take another 20 months to cover up remaining enrolment fee of $ 1000.
It means it will take 30 months before your money starts to get invested fully (less admin or other fee). You basically lost part of potential investment income for a period of 30 months.
2) Enrolment fee is reimbursed every year starting from second year of post secondary education. What if you child only go for 2 Year post secondary education? You loose enrolment fee for remaining 2 years
3) You have to make a decision before date of maturity (expected date for first year at college) to switch from Group option to self initiated plan (if you want to have an option of RRSP tranfer of investment income on deposit and grant). If you do so you loose enrolment fee. You can start with self intiated plan as of today as well but you stil be paying enrolment fee.
4) If you remain in group plan and your child go for 2 years plan only, the investment income will not be returned but will be distributed to other qualifying students.
5) Read carefully about RRSP transfer. As far as I know following condition apply
A) If your child is qualified but fails to registor in Post secondary program at date of maturity, gov grant will be returned to gov and you may qualify for RRSP transfer of investment income on GRANT only. Not on your monthly deposits
B) Above also applies if you terminate your plan.
There no entitlement of investment income in either case. Which is a big loss considering the fact you have been contributing for 17-18 years.
6) Conservative investments (Which is a plus point considerng the market as of today!)
Basically these plan are not flexible enough. You cannot decide how much money you can take out every year for your child education.
Lot of proofs and approval required if your child wants to take a break for a year or so.
I also do not like the fact for first year group plan returns my deposits for childs education. If I want to use 50-50 (my deposit + investment income on grant/deposit), it is not allowed. Basically I am not on drivers seat.
If you have not paid enough of enrolment fee yet, I would suggest to change it to individual/family plan with financial intitution.
I am sure guys like investpro/Pracktim will have more inputs on this. Above link has it all.
Yes I have group plan. I think my unit 7.5
Group plans differ from company to company... Don't assume they are all the same or that they all have the same performance and pay out structure.
there are 2 and 3 year options with CEFI that allow you to remain in the group program and receive your investment income. This is unique to CEFI group plans. Always speak to your agent or head office prior to making changes so you can be sure you have the accurate information to make your decisions.
As for enrollment fees, the fees are substantially less overall than MER fees that will accumulate with a banking institution or investment company. There are always fees, some are called MER's.
Also check the rate of return and compare to the MER. it is currently common to see MER's that exceed the Rate of return, that would effect the funds growth. How can it grow if the fees rate exceeds the return rate...
Best of all you are planning for your childs future.. this is a great way to ensure there will be funds available to allow them to persue post secondary education. Congratulations!
Quote:
Originally posted by adnancanada
I dont know much about RESP I took the plan from (cefi) and contributing 100$ /month. Does anyone with cefi. They said after 17 year he ll get around $66K. If child doent go for higer edcution your ll be transfer to RRSP.
Anyobdy with cefi eudction program. How is their reputation. Is it a good plan or should I change it.
Stay away from scholarship plans. They charge too much fees and are very inflexible. I would suggest a family non-scholarship plan instead. IM if you need further information.
Vikram
Its always advisable to keep your options open, so when an opportunity arrives; one is ready to take advantage.
With most group plans, its becomes a commitment & there are penalties if you don't abide by the minimum requirements (which can be good/bad).
Good: because it forces one to save (no matter what)
Bad: because it forces one to contribute (no matter what), or else you trigger a penalty.
I personally favor personal (non-group) RESP's (either individual or family; depending on the number of kids).....
This way:-
1. You can contribute as much as you want or as less as you want, even zero, when you loose your job or budgeting becomes difficult. (maximum limits /grant limits do apply)
2. Choose your investment choice to maximise returns: As what is good today may not stay good for ever. Infact its a given fact that flavor of investments changes over couple of years. Like Bonds (govt/corporate/junk/high yield), Equity (emerging markets/technolgy/helathcare/banking/energy/mining, etc), Commodities, Precious metals, etc. etc. One should have the flexibility to change investments as time passes.
3. Ability to withdraw proceeds, all at once at a time of kids university, without any rules/guidelines of group plans that "every year you only get so & so, & if your kid does not go to school, you loose the gains".
I have a client, she did a group RESP unknowingly long time back, where she had committed for a certain contribution amount every year (when her child was born). Later on she discovered her daughter is mentally unstable (& may not/probably will not persue school upto grade 12). She wanted to exit the plan, but there are hefty penalties. And there are no siblings. Above all her previous agent (who offered her the RESP) is out of business.
Nothing is good or bad, its a personal choice based on individual circumstance.
You be the judge: But most important "Never ever sign an application, under sales pressure".. Always do your own Due Diligence, & then proceed whatever you decide.... this way atleast you have no one else to blame...
Good Luck..
Go to the Ontario Securities Commission webpage and type in RESP
This will show you a comparison of the different tyes of plans with RESP.
Personally as an advisor, my clients have their RESP in mutual funds. All their money is theirs. No enrollment fees, deposit fees etc.
You can always contact me through my email for more info.
